Retirement Contribution Tax Credits & Deductions

Traditional IRA Contribution

If your employer does not offer a retirement plan, your traditional IRA (non-Roth) contributions are fully deductible. If you do participate in an employer-sponsored plan such as a 401(k), your contributions may be reduced or phased out entirely based on your income. File IRS Form 8606, Nondeductible IRAs, if you are not deducting all of your traditional IRA contribution.

Retirement Savings Credit

If you contribute to an IRA or an employer-provided retirement account, such as a 401(k), you may be eligible for a credit. Also, if you’re the designated beneficiary of an ABLE (Achieving a Better Life) account, you may be able to get a credit on contributions to your account. The retirement savings credit is 50%, 20%, 10% of your contributions, up to $2,000 ($2,000 each if married filing jointly). You must be age 18 or older to claim the credit and you cannot be a student or claimed as a dependent on another's return. The credit reduces any tax liability you may have, and is in addition to any deduction or exclusion from income for the contribution.

Roth Contributions and Conversions

Contributions to a Roth IRA or 401(k) are not tax deductible. If you convert your traditional IRA or 401(k) to a Roth IRA or Roth 401(k), the conversion amounts are generally fully taxable.